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QUESTION
Problem: Required Rate of return Suppose rRF=9%, rM=14% and bi=1.3 a.What is ri, the required rate of return on Stock i?
Problem: Required Rate of returnSuppose rRF=9%, rM=14% and bi=1.3a.What is ri, the required rate of return on Stock i?b.Now suppose that rRF(1) increases to 10% or (2) decreases to 8%. The slope of SML remains constant. How much this affect rM and ri?c.Now assume that rRF remains at 9% but rM (1) increases to 16% or (2) falls to 13%. The slope of SML does not remain constant. How would these changes affect ri?
